The bullish observation from deVere Group’s Nigel Green comes as it is revealed Thursday that U.S. headline consumer inflation slowed to 6.5% in December from 7.1% the previous month. “The data confirms that inflation is finally being tamed, which means there’s a higher chance that the Federal Reserve will pursue less aggressive interest rate hikes in the world’s largest economy,” he says.
Inflation is an economic concept that refers to the sustained increase in the general price level of goods and services over a period of time. It is measured as an annual percentage rate and is usually calculated using the Consumer Price Index (CPI). Inflation is caused by a combination of factors, including rising demand, an increase in the money supply, and a decrease in the purchasing power of a currency.
“The news is fuel for the markets, despite the fact that core inflation, which excludes food and energy and which is seen as a better signal than the headline measure, is still well above the Fed’s target”.
Inflation affects the economy in a variety of ways. It can make it more difficult for businesses to plan and budget, as prices for goods and services can rise unpredictably. It can also reduce the purchasing power of households, as wages and other forms of income may not keep up with the rising cost of living. Inflation can also lead to higher interest rates, as central banks attempt to control the money supply, and this can further reduce consumer spending and economic growth.
A controlled inflation means more stability in the market. In this scenario, “we expect the latest U.S. inflation data will keep the global stock market rally on track,” the expert mentioned.
In fact, world stocks rallied on Monday to their highest levels since mid-December. It comes on the back of last week, the first of 2023, also ending in positive territory.
Earlier this week, Nigel Green told the media that “economic ‘peak opportunity’ might come late in the first quarter. The second quarter of the year might see risk assets start to price in a cyclical upturn in the G7 economies.”
On the back of the fresh U.S. CPI report, the deVere CEO notes: “Sensibly, investors are already pricing in far more favourable conditions in 2023 and this new data will confirm their convictions.”
He goes on to add that the sectors, such as tech, that have “fallen during the Fed’s tightening will likely do the best in the recovery rally.”
The deVere CEO concludes: “The markets now await the next FOMC decision on interest rates, but until then, the rally is set to continue.”